Sri Lanka's new government is planning to give up majority ownership of national carrier SriLankan Airlines, six years after a partial privatisation.

New finance minister Sarath Amunugama says proceeds from the planned sale of more SriLankan Airlines shares will be put toward the country's budget. He says it has yet to be decided whether the government, which came to power after the elections on 2 April, will sell the state's entire 51% stake or a portion of this.

In 1998 a former government agreed to sell 40% of then-Air Lanka to Emirates, which also secured a 10-year management contract. Emirates later increased its stake to 43% when it acquired more shares from employees who were also given partial ownership during the privatisation process. At the time of the agreement, Emirates secured certain guarantees from the government related mainly to competition issues, including one that said the national airline would hold exclusive rights to key air routes for a set period of time.

But in December 2001 a new government came into power that was in opposition at the time of the sale to Emirates and was a vocal opponent of the deal. That administration said after its national election victory that it would conduct a detailed review of the 1998 agreement to determine whether it provided unfair protection, which led to several rounds of talks aimed at settling the dispute. Emirates and the government eventually reached agreement on unspecified changes to the 1998 deal.

Since then, SriLankan has expanded its fleet and route network as a result of a sharp increase in demand following the signing of a peace agreement between the now-replaced government and Tamil separatists. The carrier is currently negotiating leases on additional Airbus A320s and A340-300s to support an expansion of its regional and long-haul international route networks. Rising cargo demand means SriLankan is also studying the addition of large freighters.


Source: Airline Business